What Happened?

A number of stocks fell in the afternoon session after a series of divergent earnings reports highlighted a clear split in the semiconductor industry, with investors rewarding companies exposed to the AI boom while punishing those tied to slowing consumer electronics and manufacturing equipment markets. 

The market was clearly distinguishing between winners and losers during the earnings season. Companies with strong exposure to the artificial intelligence boom saw their stocks surge on optimistic forecasts. In contrast, firms exposed to the smartphone market, like Qualcomm and Skyworks Solutions, fell on signs of weakness in consumer electronics. The semiconductor equipment segment, including Lam Research and Applied Materials, also faced headwinds amid concerns of a potential slowdown, following cautious outlooks from industry leaders. This trend highlights a broader investor sentiment that is selective, favoring AI-centric growth stories over more traditional, cyclical parts of the chip market.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Semiconductor Manufacturing company Lam Research (NASDAQ: LRCX) fell 5.4%. Is now the time to buy Lam Research? Access our full analysis report here, it’s free.
• Processors and Graphics Chips company Qualcomm (NASDAQ: QCOM) fell 8.3%. Is now the time to buy Qualcomm? Access our full analysis report here, it’s free.
• Semiconductor Manufacturing company FormFactor (NASDAQ: FORM) fell 18%. Is now the time to buy FormFactor? Access our full analysis report here, it’s free.
• Semiconductor Manufacturing company Applied Materials (NASDAQ: AMAT) fell 6%. Is now the time to buy Applied Materials? Access our full analysis report here, it’s free.
• Semiconductor Manufacturing company KLA Corporation (NASDAQ: KLAC) fell 4.8%. Is now the time to buy KLA Corporation? Access our full analysis report here, it’s free.

Zooming In On FormFactor (FORM)

FormFactor’s shares are very volatile and have had 26 moves greater than 5% over the last year. But moves this big are rare even for FormFactor and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 15 days ago when the stock dropped 3.1% as a cautious outlook from semiconductor equipment giant ASML sparked a broad sell-off across the sector, hitting chipmakers and equipment suppliers alike. The negative sentiment was triggered after the Dutch firm, whose complex machines are essential for producing advanced chips, warned it could no longer guarantee growth in 2026. ASML's management cited "increasing uncertainty driven by macro-economic and geopolitical developments," including the potential for new U.S. tariffs. 

As an industry bellwether, a company whose performance is seen as an indicator of the entire sector's health, ASML's comments are a key signal of future capital spending. The warning sent a chill through the market, as concerns grow that trade tensions could disrupt the highly globalized semiconductor supply chain and slow down investment from chip manufacturers.

FormFactor is down 37.1% since the beginning of the year, and at $27.81 per share, it is trading 48.1% below its 52-week high of $53.56 from July 2024. Investors who bought $1,000 worth of FormFactor’s shares 5 years ago would now be looking at an investment worth $964.11.

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